By ALAN NICOL, Executive Member, AlanNicolSolutions
This is part two of a two-part piece. Part one can be found here.
4. Simplify Product & Service Offerings
This category has several aspects of opportunity. Let’s begin with the product or service itself. While complexity can be extravagant, simplicity is elegant. Also, by nature, simpler designs tend to enable simpler manufacturing and production. In terms of services, simpler services are easier to repeat and therefore, easier to ensure they consistently satisfy. It’s also easier to set and meet customer expectations.
Sometimes our product portfolios explode into a wide variety of configurations and options. This, too, has profit-sapping consequences. More than once, I’ve been able to point out that anywhere from 5 to 15 percent of a product line’s total expenses could be attributed to offerings or configurations that represented less than 1 percent of the total sales. Often we can save significant money and improve profit margins by eliminating the bottom 1 to 5 percent of our product portfolio.
Simplify component usage within our products. When more of our products utilize the same components, manufacture, assembly, supply, testing and design all become simpler. Similarly, the disciplines of Design for Manufacturability (DFM) and Design for Assembly (DFA) are all about designing products for simpler production. A simple way to start is to simplify the variety of fasteners your products use. Encourage similarity by making it very difficult to add a new fastener to the existing supply. Make it very simple for designers to view what fasteners are already in use.
5. Simplify Supply
There have been very popular movements in recent years to diversify supply chains. It has some compelling advantages. If one supplier cannot meet demand, another supplier is already approved and contracted, and can easily pick up the slack. It also allows a business to play suppliers against each other, constantly competing to meet expectations of quality and price. There is also some deserved belief that a diversified supply base is a more stable supply base.
There are consequences of diversified supply as well. Suppliers are not so loyal. Managing the constant changes in pricing and supply from a variety of suppliers requires more work and effort. Quality can vary between suppliers and differences can turn into perceivable differences in quality from one product to another as viewed by customers. To manage the phenomenon, more work and effort is required by your sourcing and quality departments, and often engineering, too.
The counter to the diversified supply chain has fallen out of favor, but it is a short list of reliable, loyal, consistent suppliers with competitive prices. It takes work to establish these relationships, but once established, they generally require less maintenance than a diversified supply chain.
If your strategy is to diversify supply, do so carefully. Be considerate of how much resource demand is required to maintain it, and how much error will be generated by it. Do everything possible to simplify your means of managing the diversity. Otherwise, look to simplify your supply base within reasonable risk.
6. Simplify Production Structures
I believe that the idea of simplifying manufacturing and production processes can be lumped into the “Simplify Processes” category above. Here I’d rather discuss the organizational structure for production. When the same product is produced in several different locations, things get complicated. We do this for a number of reasons.
Sometimes we want a buffer of production supply to cover risks with production coming from offshore, especially by ship. Sometimes we outgrow one facility and build another to take up the extra. Sometimes, as we shrink, we close one facility and move its remaining production to more than one other with some capacity to spare. Generally, risk management drives us to have multiple locations of production.
Unfortunately, multiple production locations often leads to multiple supply chains, multiple sets of engineering resources and multiple teams of efficiency problem-solvers. This multiplicity often leads to multiple sets of rules, different methodologies or standards, and an enormous diversity of problems. Diversity can be powerful in terms of generating ideas and creativity. It can be a burden on resources and an exacerbation of opportunity for error.
7. Simplify Markets
I know I just made a major marketing faux pas. Especially true for incorporated businesses with shareholders looking for reliable, consistent, stock value growth, the goal of most businesses is to diversify markets. Consider that it is possible to simplify without necessarily sacrificing diversity. This is particularly true when the simplicity is in the form of market management, not necessarily the markets.
Many of the same ideas that we applied to products and supply can be applied to markets. For example, just as the bottom of our product portfolio might produce more burden than sales, the bottom of our market portfolio can do the same. Don’t hesitate to abandon a market that is no longer producing profits. The alternative is to strive to reinvigorate your presence in that market, but be careful. A dry well isn’t always easy to re-tap.
Similar to managing supply chains, a bunch of small markets are much more difficult to manage than a few big ones. Don’t get so carried away chasing diversity that you ignore the opportunity of capturing more of a market that has much greater volume.
At the very least, simplify the responsibility for your various markets and try to consolidate strategies. Consider this: More markets usually leads to more strategies, more projects, more product lines, more sales strategies, etc. Your markets can drive more complexity for your business than just about any other business component. The simpler you can keep your market strategy list, the simpler the rest of your business can be.
That outlines seven different regions of business that can be simplified and some observations for where the complexity comes from in each. It’s not possible in a single post to describe in detail how to go about simplifying an entire business or even one department. Instead, I hope that the thoughts above offer some ideas about where to begin.
To go about executing simplification, I recommend nothing more than a simple set of your favorite, fundamental problem-solving tools and methods. Sometimes all we need to do is to challenge why things really need to be the way they are. Do we really need this many approvals? Why do we have two of these? Why is that different from this? If you already have a methodology for business or process improvement, you shouldn’t need anything new.
Take a good look at your business, your function, your team or your own project list this week. Examine it with an eye for complexity or simplicity. Influence what you can to simply everything around you. If you are utilizing a structured business or process improvement program, challenge it to demonstrate how things are getting simpler. If you don’t use one, you don’t need one. Simply declare war on complexity, and go forth and simplify.
Stay wise, friends.
To read part one of this two-part series, please click here. For more information, please visit www.bizwizwithin.com.